Banks must restrain foreign exchange positions – Newspaper Kommersant No. 10 (7455) dated 01/20/2023

The Central Bank will not extend the easing on non-compliance with the limits of the open foreign exchange position in euros, as requested by the Association of Russian Banks. According to bankers, the main problems were related to frozen assets due to EU sanctions against the National Settlement Depository (NSD). However, now they can be reflected in rubles, which is why the extension of indulgences is no longer so relevant.

The Bank of Russia refused credit institutions that proposed to extend for a year the easing in terms of non-compliance with limits on the open foreign exchange position (OCP) in euros. The response of the regulator, signed by the Director of the Department of Banking Regulation and Analytics Alexander Danilov, to the letter of the Association of Russian Banks (ARB) was published on January 19. The easing expired at the end of 2022, but the banks (mostly small ones, it was they who asked the ARB for this) believe that they should be canceled only “after the stabilization of the situation with liquidity in euros.”

In an appeal to the regulator, the ARB wrote that “mass withdrawal of clients from toxic currencies to the Russian ruble, yuan and other currencies of “friendly” countries has created a structural imbalance in Russian banks between assets and liabilities denominated in foreign currencies.” But banks cannot “repair the imbalance by removing assets denominated in the currencies of ‘hostile’ countries from their balance sheets, as Eurobond markets remain illiquid and loans denominated in these countries’ currencies have long maturities.”

The Central Bank’s measures to devalue the balance sheets have only deepened the imbalance, according to the ARB. According to bankers, the deficit of the euro in the market has led to the fact that rates on currency swaps with the euro exceed 200% per annum. But even under such conditions, banks cannot roll over a position in euros on the Moscow Exchange “and often do not have the opportunity to fulfill their obligations to the exchange.” “The only effective tool for banks in this case is the purchase of euros on the balance sheet with the opening of the OFP,” the ARB notes.

According to the Central Bank, the easing on the ORP was used by a narrow circle of banks and there is no “systemic need” for it. The regulator adds that a “very limited” number of banks have used euro forward transactions, including currency swaps, in order to regulate long open-ended positions. However, the Central Bank allows, if necessary, a short-term establishment of individual values ​​​​of ORP limits.

The main problems with the closure of ORPs at banks were associated with frozen assets, explains Alexei Skorodumov, Chairman of the Board of Derzhava Bank: currency asset. Although the prospect of their transformation into full-fledged money is very doubtful, they cannot be used to give to depositors, make payments, etc. You cannot sell and turn into rubles, but banks were required to believe that they had currency. And it was impossible to buy “other” euros in order to have a reserve for settlements with clients – this violates the GRP.

The relaxations concerned large players with large positions opened in foreign jurisdictions, which had to be closed at once, says Vladimir Elmanin, chairman of the board of Realist Bank. According to him, in nine months, “almost all banks somehow solved the problems associated with exceeding the ORP, so the need for relief disappeared by itself.”

In addition, the top manager adds, starting this year, the Central Bank allowed all problem assets to be valued in rubles (see Kommersant on January 17), that is, in fact, it allowed banks to either acquire new foreign exchange assets or get rid of foreign exchange liabilities by converting them into rubles.

Olga Sherunkova, Maxim Buylov